Interim Report and Accounts for the half year ended 30

Interim Report and Accounts

for the half year ended 30 June 2020

Boku, Inc.Stock Code: BOKU

Boku’s Platform, which is linked to billing, identity and sales systems of more than 200+ mobile

network operators, simplifies transacting on mobile devices. Boku’s Payment products enable

mobile phone users, of which there are more than five billion worldwide, to buy goods and

services and charge them to their mobile phone bill or pre-pay balance. Its Identity products are

used to verify user details. Companies like Apple, Google, Facebook, Microsoft, PayPal, Spotify,

Square, Sony and Western Union use Boku to

simplify sign-up, acquire new paying users and

prevent fraud.

We maintain a corporate website containing a wide range

of information of interest to investors and stakeholders at

www.boku.com

Boku is the world’s leading carrier commerce company

Our customers

3Stock code: BOKU Boku Inc Interim Report and Accounts for the half year ended 30 June 2020

HighlightsContentsChief Executive Officer’s Report ... 4

Chief Financial Officer’s Report .... 7

FinancialsConsolidated Statement of Comprehensive Income ...........12

Consolidated Statement of Financial Position .....................13

Consolidated Condensed Statement of Cash Flows ...............14

Notes to the Consolidated Financial Information ...................15

Active Users

25m

20m

15m

10m

5m

0

2017-06 2017-12 2018-06 2020-062018-12 2019-06 2019-12

30m

25m

20m

15m

10m

5m

0

Group Revenue (USD)

8m

6m

4m

2m

0m

(2m)

(4m)

Group Adjusted EBITDA* (USD)

2020 H1

TPV (USD)

3.5Bn

3.0Bn

2.5Bn

2.0Bn

1.5Bn

1.0Bn

0.5Bn

0

$1.6Bn$2.0Bn

$2.3Bn$2.7Bn

$3.1Bn

2018 H1 2018 H2 2019 H1 2019 H2

2017–H1 2017–H2 2018–H1 2018–H2 2019–H1 2019–H2 2020–H1

($2.8m)

$0.4m $2.6m$3.6m $3.5m $3.1m

$6.4m

+84%

$10.2m$14.3m

$16.9m $18.4m

$19.4m $20.1m$22.0m

$3.4m $3.3m $2.7m

$3.3m$0.8m

+9%

2017–H1 2017–H2 2018–H1 2018–H2 2019–H1 2019–H2 2020–H1

+36%

4.78.1

10.313.5

15.317.8

20.3

+33%

Payments Underlying Identity Non-recurring

*Adjusted EBITDA is Earnings before interest, taxation, depreciation and amortization, adjusted for stock option expenses, Forex gains/losses and Exceptional items

4

STRATEGIC REPORT

Boku Inc Interim Report and Accounts for the half year ended 30 June 2020www.boku.com

Chief Executive Officer’s ReportSimplicity: it’s worth paying for

C harlie Mingus the American jazz musician once said, “Making the simple compli-

cated is commonplace; making the complicated simple, awesomely sim-ple, that’s creativity”

Boku’s customers, global compa-nies like Apple, Sony, Spotify and Netflix don’t want to deal with 200+ different connections to mobile net-work operators (“MNOs”) they need someone to make the complicated simple. And that someone is Boku. We have done the hard work of building direct connections to most of the world’s big telcos and can thus provide a single, simple interface for them to implement. Connect once — reach the world. That aggregation unlocks the value latent in the MNOs of the world. By aggregation we have created value.

But it doesn’t stop there: in this new mobile world the way that people pay is also changing. We have also simpli-fied the payment process. In the past, in the PC era, payment was a distinct step. You clicked to put things in your shopping basket and then clicked to checkout selecting your payment method, which could differ from transaction to transaction. Checkout was a fairly complex process. It was Amazon who introduced a 1-Click checkout and things have been taken further for mobile commerce.

It is complex and fiddly to enter card details on a glass screen. It adds friction to the payment process. Friction that leads to fewer transac-tions, to more abandoned baskets. The simplest way of dealing with this friction is to eliminate the payment step altogether. To make payment a by-product of interacting with the app, to indicate the transaction or service you require and for payment

to happen invisibly in the back-ground. For this to happen you need register, to store a payment method on file.

Boku has made that awesomely simple: because the phone company knows your phone number without having to ask, it’s a simple as tap-ping once on the screen to put future charges through to your phone bill.

Making the complicated simple, awesomely simple, that’s creativity!

This philosophy has helped Boku’s core business of Direct Carrier Billing (“DCB”) to grow. Total Payment Volume (“TPV”) of $3.1 billion in the first half of 2020 was a 36% increase compared with the same period in 2019. Other companies have suffered through the pandemic. Not Boku. For us, adoption was accelerated as more people spent more time at home due to the coronavirus lockdowns and discovered digital entertain-ment. Nearly 11 million new users (+19% on H1 2019) made their first Boku transaction and experienced that simplicity for the first time, growing monthly active users in the month of June 2020 alone to more than 20 million.

Revenues in Payments grew by 13.7% (adjusting for a non-recurring item) and Adjusted EBITDA1 by 45% reflecting the high operating leverage implicit in Boku’s platform business.

Boku is now by some distance the leading player in the DCB industry, with strong volume growth, increas-ing revenue and operating lever-age driving increases in Adjusted EBITDA. The acquisition of Fortumo on 1 July 2020 for an enterprise value of $41.0 million further cemented our position in this sector.

Business doesn’t travel in straight linesErnest Hemingway included the following dialogue in his 1926 novel, The Sun Also Rises: “How did you go bankrupt?” Bill asked. “Two ways,” Mike said. “Gradually and then suddenly.”

Gradually, then suddenly. It’s not just how businesses go bust, it’s also how they grow. All growth even-tually asymptotes, levels off, slows. And when you start a new business, growth is hard to find, until you reach the point of inflection and growth accelerates.

Business doesn’t go in straight lines; it rises and falls in S-curves. The job of the CEO is not only to grow his business through a single S-curve, but to be laying the foundations for future growth by investing to find new S-curves to climb.

Boku has established itself as the leading Direct Carrier Billing com-pany in the world. We’re process-ing transactions at a run rate of $7bn annually. Apple, Google, Sony, Microsoft, Spotify, and Netflix all use our services. We have grown rev-enues from $17 million in 2016 to


STRATEGIC REPORT

Business doesn’t go in straight lines; it rises and falls in S-curves

more than $50 million in 2019. We will continue to grow as we roll out our merchants into new geographies.

Investors appreciate this growth. But we are not going to rest on our laurels, we’re investing to find new S-curves to climb.

DCB payments are mostly con-fined to digital commerce and, whilst this is not a small market, it is still only a fraction of global mobile commerce. DCB payments are strong in Europe, Asia and the Middle East. Growth in Latin America is picking up, but main-land China and North America are areas where for a combination of regulatory and commercial rea-sons, it’s not able to achieve trac-tion. Boku aspires to enhance every

mobile interaction: digital and physical in all parts of the world

Boku’s merchant base and carrier network can be repurposed to new objectives. Rather than just allow-ing digital merchants to acquire new customers we can also help simplify mobile commerce for merchants in other verticals and re-use the skills developed to enable charges to be put through to phone bills also to support a whole range of Local Payment Methods (“LPM”), not just carrier billing.

One such Local Payment Method is eWallets. They’re the way that peo-ple, especially in Asia are starting to pay and Boku is now live and pro-cessing transactions with nine eWal-lets in seven countries. Mainstream

Console and Digital Streaming Music merchants use Boku’s technology to reach eWallets in Indonesia and Korea. This expansion from DCB to LPM offers the chance of substan-tial returns. The same skills, plat-form and people can be repurposed to integrate LPMs at minimal addi-tional cost to Boku giving powerful operating leverage. Volumes are cur-rently modest, but will grow over the coming years to become a significant profit driver for the Group.

We’re also helping merchants to simplify the business of verify-ing phone numbers through our Identity business - heretofore a fid-dly business involving text messages and one time codes. We can check the ownership of phones and detect

When a new business starts, growth is

slow, until a point of inflection is reached

Rapid growth then ensues as customer adoption takes off

Growth then moderates as adoption is completed

New products also have to go through the process of

discovering product/market fit, before hitting an inflection point

As before, growth then improves rapidly and the

company needs to move on to the next S-curve

Performance

Time

6

STRATEGIC REPORT


account takeovers, one of the curses of our modern connected world. Boku Identity has made great strides in growing its network in 2020, but this is not yet reflected in the reve-nue numbers. Whilst DCB benefited from more people staying at home, Identity services, more dependent on people being out and about, suf-fered. Volumes and revenues on our existing customers were impacted, and new revenues in new geogra-phies have not yet risen to com-pensate. First half revenues at $2.7 million were lower than the same period last year. Despite this, tar-geted investment and strict expense control delivered reduced Adjusted EBITDA losses to $2.0 million in the first half (2019: $2.3 million).

We are building the world’s larg-est carrier identity network. The forward-looking indicators for the

division are strong. The interna-tional supply network now extends to more than 200 carriers in 57 countries. Large customers are interested in the service and moving through the pipeline. Recent suc-cesses include LexisNexis and FIS, the owner of Worldpay.

Gradually then suddenly. eWal-lets and Identity are new businesses travelling the lower reaches of their S curves, but in time, will power our growth into the future.

Taken together the established business of DCB and the emerging Local Payment Method and Identity businesses have delivered growth: Group Revenues increased to $24.7 million and underlying Group Adjusted EBITDA grew by 84% to $6.4 million. We are also pleased to be able to report a small operating profit for the period of $0.2 million.

Current Trading and OutlookBoku’s core business of Direct Car-rier Billing is in rude health. The company has seen a boost in the adoption of digital services during the pandemic and has proved its ability to execute even as the ma-jority of the company are working from home. With this foundation, enhanced by a contribution from Fortumo, supporting our invest-ment in Identity and a strong pipe-line of customers for our Local Payment Method offer, including eWallets, I remain confident that full year Group Revenue and Ad-justed EBITDA performance will be at least in line with current mar-ket expectations.

Jon PrideauxChief Executive Officer15 September 2020

Chief Executive Officer’s Report


STRATEGIC REPORT

Chief Financial Officer’s ReportThe first half of 2020 was chal-

lenging for many companies due to the global coronavirus

pandemic. The effect on Boku was positive in Payments, but less so in Identity.

Our Payments division benefited as international digital merchants like Apple, Netflix, Sony and Spotify ben-efited from an increase in demand for home entertainment and as a result this division performed strongly in H1. Good revenue growth to $22.0 mil-lion and lower than expected costs as the pandemic restricted travel, led to enhanced Adjusted EBITDA for the period. We also successfully completed a $25.0 million fundraise from existing investors in June to partly finance the acquisition of DCB company, Fortumo Holdings Inc (“Fortumo”) which was announced on 17 June 2020 and com-pleted on 1 July 2020, and which con-solidated Boku’s leading position in the global DCB market.

The impact on Boku’s Identity di-vision was less positive. Revenues

HighlightsGroup• Group Adjusted EBITDA1 for H1 2020 of $6.4 million is 84% higher

than H1 2019 (H1 2019: $3.5 million adjusted for a one-time revenue item2. H1 2019 reported Adjusted EBITDA $4.3 million).

• Group Revenues for H1 2020 increased to $24.7 million (H1 2019 $22.7 million2, excluding the impact of a non-recurring payments item: $23.5 million reported)• Payments - Underlying Payments revenue2 growth has been

strong at over 13.7% to $22.0 million• Identity revenue of $2.7 million impacted by coronavirus

though with minimal effect on Group Adjusted EBITDA• Adjusted operating expenditure3 of $16.0 million for H1 2020 is

in line than the same period last year (H1 2019: $16.3 million) as coronavirus reduced marketing/events costs and T&E across the Group

• Operating Profit for H1 2020 of $0.2m compared to an operating loss of $2.3 million for the same period in 2019.

• Acquisition of DCB payments company Fortumo Holdings Inc (‘Fortumo’) completed on 1 July consolidating Boku’s dominant position in the global Direct Carrier Billing (‘DCB’) market.

• Group cash of $80.7 million at 30 June 2020 which included $44.5 million of cash held to pay for the acquisition of Fortumo on 1 July 2020. Excluding this cash, Group cash balance were $36.2 million inclusive of $0.8 million of restricted cash (31 December 2019: $35.6 million including $0.9 million of restricted cash). To part-fund the Fortumo acquisition a new $20.0m debt facility was taken out in June and was fully drawn down at 30 June 2020. The balance of the acquisition funding was from a successful placing in June at 85p per share.

• The average daily cash balance - a measure which smooths out the effect of carrier and merchant payments, was $25.7 million in June 2020 (December 2019: $22.4 million)

➢more highlights

8

STRATEGIC REPORT


from some existing merchants - for example taxi services – reduced as their businesses were affected and new sales understandably slowed. However, headcount cost measures and Covid-19 related savings in trav-el and marketing/events meant that Identity Adjusted EBITDA for H1 2020 was in line with expectations at a reduced loss of $2.0 million (2019: $2.3 million loss) on lower revenues of $2.7 million (2019: $3.4 million). Good progress was made on Identity supply during the period.

As a result, underlying Group Ad-justed EBITDA of $6.4 million was 50% higher than H1 2019 (H1 2019: reported $4.3 million). When adjusted for a one-time revenue item2 in H1 2019, the underlying like for like in-crease in H1 2020 is 84%, with Pay-ments delivering $8.4 million of Adjusted EBITDA in the first half, partly offset by an Identity Adjusted EBITDA loss of $2.0 million.

Financial reviewStrong Adjusted EBITDA growth driven by Payments division performanceWe are pleased to report an 84% in-crease in Group Adjusted EBITDA to $6.4 million for the first half of 2020, (H1 2019: $3.5 million adjust-ed for a one-time revenue item2. Re-ported $4.3 million), with Payments Adjusted EBITDA of $8.4 million up 45% on H1 2019 (H1 2019: $5.8 million2, $6.6 million reported) be-ing offset by a reduced $2.0 million Adjusted EBITDA loss in Identity, (H1 2019: $2.3 million loss).

Payments division• Underlying Payments revenues2 increased by 13.7% to $22.0

million (H1 2019 $19.4 million , excluding the impact of a non-recurring item, $20.2million reported) as Boku Payments benefited from the coronavirus pandemic particularly in April and May 2020.

• Payments Adjusted EBITDA increased by 45% to $8.4 million (H1 2019 $5.8 million2 excluding the impact of a non-recurring item. $6.6 million reported)

• Total Payment Volume (“TPV”)4 of $3.1 billion in H1 2020, 36% up on H1 2019 ($2.3 billion)

• 10.8 million new users made their first ever Boku transaction during the first half of the year, 19% up on the prior year, driven by increased adoption during the coronavirus lockdowns

• 20.3 million Monthly Active Users (“MAU”) of the Boku platform in June 2020 (June 2019: 15.3 million), a 33% increase

• Carrier billing launches in H1 2020 with Google, Netflix, Sony, Spotify and Tencent

• Good progress with eWallets with nine mobile wallets now live including Grabpay, GoPay and Dana and further contracts signed

Identity division• Identity revenues of $2.7 million (H1 2019: $3.4 million).

Revenues and new sales were impacted by coronavirus, though with minimal impact on expected Adjusted EBITDA

• Identity Adjusted EBITDA loss reduced to $2.0 million (H1 2019 $2.3 million loss)

• Good progress on building out international carrier supply - now live with more than 200 carriers in 57 countries. Contract wins including LexisNexis and FIS (owners of Worldpay) with merchants now live and generating revenues in five countries.

Chief Financial Officer’s Report

1 Adjusted EBITDA (Earnings before interest, taxation, depreciation and amortization): Adjusted for stock option expenses, Forex gains/losses and Exceptional items. Underlying Group adjusted EBITDA is Adjusted EBITDA less the one-time item 790K mentioned in item 2. 2 2019 H1 revenue included $790k of one off revenues relating to a contractual change that accelerated revenue recognition of a large contract. This increased H1 2019 Adjusted EBITDA by the same amount 3 Adjusted operating expenditure is Gross Profit less Adjusted EBITDA 4 TPV is the US$ value of transactions processed by the Boku platform


STRATEGIC REPORT


Group revenues for H1 2020 in-creased 9% to $24.7 million on an underlying basis (H1 2019 $22.7 million2, excluding the impact of a non-recurring payments item: $23.5 million reported). Coronavi-rus related lockdowns positively im-pacted the Payments division reve-nue which increased by over 13.7%2 to $22.0 million while Identity rev-enues were negatively impacted and reduced slightly to $2.7 million.

Adjusted operating expenditure3 of $16.0 million for H1 2020 is in line than the same period last year (H1 2019: $16.3 million) as corona-virus materially reduced marketing/events costs in the Identity division and reduced travel and expenditure across the Group which we expect to continue in H2 however these costs are likely to return to nor-mal levels next year. Payroll costs increased slightly due to planned annual pay rises and the Payments division invested in additional sales resource. However, Identity payroll costs were lower than in H1 2019 as the business refined its cost base.

$1.0 million of development ex-penditure was capitalised in H1 2020 reflecting the work undertaken to in-tegrate and enhance the Boku Iden-tity and Payments platform. (2019: $0.7 million).Boku PaymentsUnderlying Payments revenues2 increased by 13.7% to $22.0 million (H1 2019 $19.4 million2, excluding the impact of a non-recurring item, $20.2 million reported) as Total Payment Volume (“TPV”)4 increased by 36% to $3.1 billion (H1 2019: $2.3 billion). Gross margin improved in the period as we received payment for previously provided for bad debts which increased margin by $211k.

Underlying Payments Adjusted EBITDA increased 45% to $8.4 mil-

lion (H1 2019: $5.8 million2). 10.8 million New Users made their

first ever Boku transaction during the first half of the year, 19% up on the prior year, driven by increased adoption during the coronavirus lockdowns. Monthly Active Users (“MAU”) of the Boku platform in June 2020 increased by 33% to 20.3 million (June 2019: 15.3 million).

Carrier billing launches were large-ly unaffected by Covid-19 and we launched multiple carriers world-wide in H1 2020 with major mer-chants such as Google, Netflix, Sony, Spotify and Tencent.

Average weighted take rates for Payments were in line with expec-tations at 0.7%. Boku’s transaction merchants, which have a lower take rate, continued to grow more quickly than its settlement merchants (where Boku provides a full cash collection service) where we charge a higher take rate. Take rates in both divisions were stable so the mix effect of more volume through our transaction merchants accounts for the small decline in blended take rates. Since IPO, Boku has not reduced its rates to any of its merchants nor has it lost a material merchant.

Good progress was made with in-tegrations with eWallets, which is an entirely new market for Boku Pay-ments, which it can access at minimal cost, with nine mobile wallets now live including Grabpay, GoPay and Dana and further contracts signed.

Acquisition of Fortumo Boku completed the acquisition of DCB payments company Fortumo on 1 July for a maximum enterprise value of $41.0 million ($5.4 million of the consideration subject to meet-ing first year earnout targets) consol-idating Boku’s leading position in the global DCB payments market. For-

tumo primarily focuses on providing mobile payment solutions to over 400 small-to-medium sized enterprises, but also services larger merchants including Google, Amazon and Ten-cent. In 2019, Fortumo generated revenues of $7.2 million and Adjust-ed EBITDA of $2.3 million.

Boku IdentityBoku Identity revenues were impacted by the US carrier supply issue that occurred in late 2019 and by Covid-19 restrictions, which impacted both existing merchant revenues and new Identity sales. Revenues in the first half were $2.7 million (H1 2019: $3.4 million). Adjusted operating expenditure was lower than H1 2019 due to cost savings in headcount, reduced travel and marketing spend due to the pandemic, delivering a reduced Adjusted EBITDA loss of $2.0 million, (2019: $2.3 million Adjusted EBITDA loss).

Boku Identity made good pro-gress on building out international carrier supply in H1 2020 and is now live with more than 200 carri-ers in 57 countries. Merchants are now live and generating revenues in five countries and Boku Identi-ty saw a number of contract wins including with LexisNexis and FIS (owners of Worldpay).

Group Operating ProfitGroup Operating Profit for H1 2020 improved by $2.5 million to $0.2 million compared to an operating loss of $2.3 million for the same period in 2019. This can be broken down as follows:• Foreign Exchange movements

resulted in a small gain of $0.2 million (H1 2019: $0.2 million gain)

• Stock Option Expenses - stock option expenses reduced to $3.0 million from $4.2 million in H1 2019 as Boku issued fewer

10

STRATEGIC REPORT


Restricted Stock Units (“RSUs”) to staff in the period and during 2019 when compared to 2018. We expect this trend to continue going forward and that the annual charge for Stock Option Expenses will fall. Boku has issued either RSUs or share options to all staff annually. RSU and stock option charges are spread over three and four years respectively from the date of grant based on the Black Scholes method

• Exceptional Items of $0.9 million (2019: $0.3 million) related to acquisition costs incurred up to 30 June 2020 in relation to the acquisition of Fortumo which completed on 1 July 2020. Exceptional Items in H1 2019 related to the closure of our Italian entity and transaction costs relating to the Danal acquisition in January 2019

• Net financing expenses were reduced to $164k in 2020 (2019: $224k) which related to interest on right-of-use assets in particular office leases. There were no other interest payments as the Group had no borrowings until the loan to finance the Fortumo acquisition which was taken out on 30 June 2020.

• The Group generated $6.0 million of cash from operations during H1 2020, prior to movements in working capital. (H1 2019: $2.8 million. This has been driven primarily by the improvement in Adjusted EBITDA.

Balance Sheet and Cashflow• Group cash balances were $80.7

million at 30 June 2020 which included $44.5 million of cash held to pay for the acquisition of Fortumo on 1 July 2020. Excluding this cash, the balances were $36.2 million (31 December 2019: $35.6 million).

Included in this cash were restricted cash balances of $0.8 million.

• To part finance the acquisition of Fortumo which completed on 1 July 2020, Boku took on a debt facility of USD $20.0 million with Citibank in June which was fully drawn at 30th June 2020. This facility was split:• $10m term loan repayable

over 4 years; and• $10m Revolving Credit

Facility (“RCF”, “Revolver”) available to be drawn down in Euro, GBP or US$. Boku intends to use its surplus cash balances (see average daily cash balance point below) to partially offset the RCF balance during the monthly cycle and thereby reduce interest payments.

• The balance of financing was by way of a placing at 85p per share in June raising net proceeds of $24.1 million primarily from existing shareholders.

• The average daily cash balance - a measure which smooths out the effect of carrier and merchant payments, was $25.7 million in June 2020 (December 2019: $22.4 million).

• We assessed our goodwill and intangibles for impairment and deemed that no impairment exists at 30 June, 2020.

Principal Risks and Uncertainties The principal risks and uncertainties facing the Group remain broadly consistent with the Principal Risks and Uncertainties reported in Boku’s 31 December 2019 Annual Report. Since the 2019 Annual Report, the Board have been monitoring and mitigating the effects of the following

international events on the Group’s business:Covid-19In March 2020, the World Health Organisation declared a global pandemic due to the Covid-19 virus that has spread across the globe, causing different governments and countries to enforce restrictions on people movements, a stop to international travel, and other precautionary measures. This has had a widespread impact economically and a number of industries have been heavily impacted. This has resulted in impacts on certain industries and a more general need to consider whether budgets and targets previously set are realistic in light of these events.

As described above, the Covid-19 pandemic has impacted our business, both positively and negatively. The Board believes that the business is well positioned to be able to navigate through the impact of Covid-19 due to the positive impact of Covid-19 on its main Payments businesses, its dominant position in the niche Direct Carrier Billing market, its strong bal-ance sheet and strong cash position. BrexitThe United Kingdom (‘UK’) formally left the European Union (‘EU’) on 31 January 2020. The period of time from when the UK voted to exit the EU on 23 June 2016 and the formal process initiated by the UK government to withdraw from the EU, or Brexit, created volatility in the global financial markets. The UK is now in a transition period, being an intermediary arrangement covering matters like trade and border arrangements, citizens’ rights and jurisdiction on matters including dispute resolution, taking account of The EU (Withdrawal Agreement) Act 2020, which ratified the



STRATEGIC REPORT

Withdrawal Agreement, as agreed between the UK and the EU. The transition period is currently due to end on 31 December 2020 and ahead of this date, negotiations are ongoing to determine and conclude a formal agreement between the UK and EU on the aforementioned matters.

Boku is not materially impacted by Britain’s withdrawal from the EU. Our business is growing fastest in Asia and already traded in a Europe of nations pre-Brexit. An immaterial amount of revenue is derived from EU passport-ing of our e-money licence.

Looking AheadThe Covid-19 pandemic had a positive impact on our Payments division in H1 2020 increasing transaction volumes and revenues


particularly in April and May, but also reducing our operating expenses as travel and entertainment costs reduced significantly – both of which improved Payments Adjusted EBITDA. Whilst most launches have proceeded as expected, a few have been pushed back. While the peak of the pandemic uplift has passed as full lockdown has ended in many countries, we have seen a continuing benefit from the accelerated adoption of subscription services, which is encouraging for H2.

Boku’s Identity division was more adversely impacted by Covid-19 with volumes from existing merchants re-duced as their businesses slowed and a slowdown in new sales as face to face meetings were not possible. However

careful cost management and a con-tinued build out of our Identity sup-ply both directly and through part-ners means that progress was made and the Identity division is expected to show revenue growth and further reduced losses in 2021 as it moves to-wards cash breakeven.

While Identity remains a work in progress, on the Payments side the market consolidation from the Fortumo acquisition plus the sub-stantial opportunity that eWallets present, allied to significant opera-tional leverage that comes from our platform means we are confident for the future.

Keith ButcherChief Financial Officer15 September 2020

12

FINANCIALS


Consolidated Statement of Comprehensive Income

Note

(Unaudited) Period ended30-Jun 2020

$’000

(Unaudited) Period ended30 -Jun 2019

$’000

Revenue 3 24,690 23,531Cost of sales (2,242) (2,938)Gross profit 22,448 20,593Administrative expenses (22,227) (22,898)

Operating profit/(loss) analysed as:Adjusted EBITDA* 6,441 4,291Depreciation and amortisation (2,455) (2,262)Share Option expense (3,009) (4,226)Foreign exchange gains 164 223Exceptional items (included in administrative expenses) (920) (331)

Operating profit/(loss) 221 (2,305)Finance income 4 30 29

Finance expense 4 (164) (224)

Profit/(loss) before tax 87 (2,500)

Tax expense (51) (77)

Net Profit/(loss) for the period attributable to equity holders of the parent company 36 (2,577)

Other comprehensive losses net of tax

Items that will or may be reclassified to profit or loss

Foreign currency translation loss (427) (67)Net decrease in fair value of cash flow hedge derivatives - (3)

Total comprehensive loss for the period (427) (70)

Total comprehensive loss for the period attributable to equity holders of the parent company (391) (2,647)

Profit/(loss) per share for loss attributable to the owners of the parent during the year

Basic and fully diluted ($) 0.0001 (0.0108)

*Earnings before interest, tax, depreciation, amortisation, share-based payment, foreign exchange gains/(losses), and exceptional items.


FINANCIALS

Consolidated Statement of Financial Position

Note

(Unaudited)30-Jun 2020

$’000

(Audited)31-Dec 2019

$’000

Non-current assetsProperty, plant and equipment 3,920 3,512Intangible assets 46,968 46,819Deferred income tax assets 1,777 1,826

Total non-current assets 52,665 52,157

Current assetsTrade and other receivables 59,723 53,592Cash and cash equivalents 5 79,864 34,747Restricted cash 5 836 876

Total current assets 140,423 89,215

Total assets 193,088 141,372

Current liabilitiesTrade and other payables 85,096 77,995Loans and borrowings 6 1,123 2,098Lease liabilities 6 983 1,723

Total current liabilities 87,202 81,816

Non-current liabilitiesOther payables 394 791Deferred tax liabilities 450 449Loans and borrowings 6 18,377 -Lease Liabilities 2,377 1,358

Total non-current liabilities 21,598 2,598

Total liabilities 108,800 84,414

Net assets 84,288 56,958

Equity attributable to equity holders of the companyShare capital 28 25Share premium 235,913 208,196Foreign exchange reserve (2,453) (2,027)Retained losses (149,200) (149,236)

Total equity 84,288 56,958

14

FINANCIALS


Consolidated Condensed Statement of Cash Flows (Unaudited)

Period ended30-Jun 2020

$’000

(Unaudited) Period ended30-Jun 2019

$’000

Cash from/(used in) in operations 5,561 (1,965)Income taxes paid (60) -

Net cash from/(used in) operating activities 5,501 (1,965)

Investing activitiesPurchase of property, plant and equipment (395) (184)Purchase of software development (1,392) (744)Restricted cash (net) 40 (445)

Interest received 30 29

Net cash used in investing activities (1,717) (1,344)Financing activitiesRepayment of lease liabilities (1,077) (910)Cash paid for acquisition, net of cash acquired - (742)Issue of common stock on exercise of options and RSUs 284 421Interest paid on borrowings (15) (224)Proceeds from issue of new ordinary shares for acquisition 25,129 -Share issue costs (654) -Proceeds from line of credit 20,000 -Loan issue costs (501) -Repayment of line of credit (2,092) (150)

Net cash from/(used in) financing activities 41,074 (1,605)

Net increase/(decrease) in cash and cash equivalents 44,858 (4,914)

Effect of foreign currency translation on cash and cash equivalent 259 4Cash and cash equivalents at beginning of period 34,747 31,073

Cash and cash equivalents at end of period 79,864 26,163


FINANCIALS

Notes to the Consolidated Financial Information1. Corporate InformationThe consolidated financial information represents the results of Boku Inc. (“the Company”) and its subsidiaries (together referred to as “the Group”).

Boku Inc. is a company incorporated and domiciled in the United States of America. The registered office of the Company is located at 735 Battery St, 2nd Floor, San Francisco, CA 94111, United States.

On 20th November 2017, the Company’s shares were listed on the Alternative Investment Market of the London Stock Exchange (“AIM”).

The principal business of the Group is the provision of mobile billing and identity solutions for mobile network operators and merchants. These solutions enable merchants to accept online payments, simplify transactions and avoid fraud, especially on mobile devices.

The Board of Directors approved this interim financial information on 15 September 2020.

2. Basis of preparation and accounting policiesThese interim consolidated financial statements have been prepared using accounting policies based on International Financial Reporting Standards (IFRS and IFRIC Interpretations) issued by the International Accounting Standards Board (“IASB”). They do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the 31 December 2019 Annual Report. The financial information for the half years ended 30 June 2020 and 30 June 2019 does not constitute full financial statements and both periods are unaudited.

The annual financial statements of Boku Inc., (‘the Group’) are prepared in accordance with IFRS as issued by the IASB. The Annual Report and Financial Statements for 2019 have been issued and are available on the Group’s investor relations’ website: https://www.boku.com/investor-relations/reports-documents. The Independent Auditors’ Report on the Annual Report and Financial Statements for the year ended 31 December 2019 was unqualified and did not draw attention to any matters by way of emphasis.

The Group has applied the same accounting policies and methods of computation in its interim consolidated financial statements as in its 31 December 2019 annual financial statements, except for those that relate to new standards and interpretations effective for the first time for periods beginning on (or after) 1 January 2020 and will be adopted in the 2020 financial statements. There are deemed to be no new and amended standards and/or interpretations that will apply for the first time in the next annual financial statements that are expected to have a material impact on the Group.

Changes in accounting policies and disclosureGoing concernIn March 2020, the World Health Organisation declared a global pandemic due to the COVID-19 virus that has spread across the globe, causing different governments and countries to enforce restrictions on people movements, a stop to international travel, and other precautionary measures. This has had a widespread impact economically and a number of industries have been heavily impacted. This has resulted in supply chain disruption in certain industries, uncertainty over cash collection from certain suppliers, and a more general need to consider whether budgets and targets previously set are realistic in light of these events.

In carrying out the going concern assessment, the Directors have considered a number of scenarios, taking account of the possible impacts of the pandemic, in relation to revenue forecasts for the next 12 months. A scenario analysis also assessed what the Adjusted EBITDA will need to be reduced by in order for the Group to fail the new covenants. The analysis shows that only a drastic drop in Adjusted EBITDA will cause such a concern. The Board also considered milder scenarios were with a smaller reduction in revenues was forecasted. In such a scenario, the Group has identified cost reductions which could be implemented, to help mitigate the impact on cash outflows.

https://www.boku.com/investor-relations/reports-documents

16

FINANCIALS


In reaching their going concern assessment, the Directors have considered the foreseeable future, a period extending 12 months from the date of approval of this half-yearly financial report. This assessment has included consideration of the forecast performance of the business, as noted above, the cash and financing facilities available to the Group. In light of all of this analysis, the Directors are satisfied that, even if this downside scenario were to occur, the Group has sufficient cash resources over the period. As such, the consolidated financial statements have been prepared on a going concern basis.

3. Segmental analysis(a) Revenue from operations


$’000


$’000

Revenue arises from:

Provision of services 24,690 23,531

(b) Operating segmentsThe Group’s main operating segments are based on its main revenue generating activities. For each of the segments, the Group CEO and CFO review internal management reports to profit before taxation, on a monthly basis. The following summary describes the operations in each of the Group’s reportable segments.

Payments business segment: provision of a payment platform which enables mobile phone users to buy goods and services and charge them to their mobile phone bill or prepaid balance.

Identity business segment: Provision of identity services which are used to simplify transactions or combat fraud. Operating segment information under the primary reporting format is disclosed below:

H1 2020 Payments $’000

Identity $’000

Total $’000

Fee Revenue 22,032 2,658 24,690

Cost of sales (391) (1,851) (2,242)

Gross Profit 21,641 807 22,448

Administrative Expenses (18,914) (3,313) (22,228)

Operating loss analysed as:Adjusted EBITDA* 8,478 (2,037) 6,441 Depreciation and amortisation (2,042) (413) (2,455)Stock Option expense (2,928) (81) (3,009)Foreign exchange gains 139 25 164

Exceptional items (included in administrative expenses) (920) - (920)

Operating Profit 2,727 (2,506) 221Finance income 30 - 30Finance expense (154) (10) (164)

Profit before tax 2,603 (2,516) 87

Notes to the Consolidated Financial Statements


FINANCIALS

H1 2019 Payments $’000

Identity $’000

Total $’000

Fee Revenue 20,167 3,364 25,531

Cost of sales (1,017) (1,921) (2,938)

Gross Profit 19,150 1,443 20,593

Administrative Expenses (18,225) (4,653) (22,898)

Operating loss analysed as:Adjusted EBITDA* 6,637 (2,346) 4,291 Depreciation and amortisation (2,054) (208) (2,262)Stock Option expense (3,573) (653) (4,226)Foreign exchange gains/(losses) 226 (3) 223

Exceptional items (included in administrative expenses) (331) - (331)

Operating loss 905 (3,210) (2,305)Finance income 29 - 29Finance expense (205) (19) (224)

Loss before tax 729 (3,229) (2,500)

4. Finance income and expenses

(Audited)30-Jun 2020

$’000


$’000

Finance income30 29Interest income from bank deposits

Total 30 29

Finance expensesInterest on bank loans & overdrafts - 77Interest on finance leases and hire purchase contracts - 2Interest on lease liabilities 149 131Other interest payable 15 14

Total 164 224

Net finance expenses 134 195


18

FINANCIALS



5. Cash and cash equivalents and restricted cash(Unaudited)30-Jun 2020

$’000

(Audited31-Dec 2019

$’000

Cash and cash equivalents 79,864 26,163

Restricted cash 836 1,696

Total cash 80,700 27,859

The restricted cash primarily includes e-money received but not yet paid to merchants (in transit), cash held in the form of a letter of credit to secure a lease agreement for the Company’s San Francisco office facility and a certificate of deposit held at a financial institution to collateralise Company credit cards.

6. Loans and borrowings(Unaudited)30-Jun 2020

$’000

(Audited) 31-Dec 2019

$’000

CurrentBank loans (secured) net of loan costs 1,123 2,000

Obligations under lease contracts 983 1,897

Total 2,106 3,897

Non-currentObligations under lease contracts 2,377 2,184Bank loans (secured), net of loan costs 18,377 -

Total 20,754 2,184

Principal terms and the debt repayment schedule of the Group’s loan and borrowings are as follows:In November 2013, the Group entered into a Loan and Security Agreement (the Agreement) with a financial

institution that allows for borrowings of up to $15,000,000 under a revolving line of credit through to February 2015. This was extended first, through to March 2017 and subsequently through to September 2019. However, the amounts borrowed under this Agreement were partially repaid after the IPO; the balance outstanding at 31 December 2019 was $2,000,000 and was repaid in full in January 2020.

On 17th June the Group entered into a new Loan Security Agreement with a different financial institution and borrowed $20,000,000 which was used for the acquisition of Fortumo on 1st July 2020 (further information on this borrowing is the Chief Financial Officer’s report and Note 7 below).

The balance of lease liabilities at period end was $983,170 (31 December 2019: $1,723,250 and non-current liabilities by $2,377,416 (31 December 2019: $1,358,785).


FINANCIALS


7. Post balance sheet eventsOn 1st July 2020 the Group acquired a 100% interest in Fortumo Holdings Inc. (‘Fortumo’) from its shareholders.

Fortumo was acquired for a maximum consideration of $45.0 million (the “Total Maximum Consideration”), which includes Boku acquiring $4.0 million of net working capital. The Total Maximum Consideration comprises $37.8 million in cash along with approximately $1.8 million in restricted stock units payable to the selling equity holders of Fortumo (the “Vendors”) plus further consideration of up to $5.4 million in cash, representing 12% of the total maximum consideration, which is to be held in escrow subject to certain Adjusted EBITDA earn-out, working capital and indemnity conditions being satisfied.

The Acquisition and associated costs were funded by way of; (i) an unconditional placing that raised gross proceeds of approximately $25.1 million (the “Placing”); and (ii) new bank facilities of approximately $20.0 million.

The acquisition is a significant step in Boku’s global Direct Carrier Billing (“DCB”) growth strategy, bringing together the two most profitable platforms in the DCB market with complementary capabilities and customer bases. The acquisition will cement the Group’s positioning as a leading mobile payment and mobile identity solutions company.

Fortumo primarily focuses on providing mobile payment solutions to over 400 small-to-medium sized enterprises, but also services larger merchants including Google, Amazon and Tencent.

The acquisition is expected to deliver operational efficiencies for Boku through access to Fortumo’s lower operational cost base in Estonia and use of Fortumo’s direct connections in many Asian markets to complement the existing Boku network. The acquisition is expected to be immediately earnings accretive for Boku (before synergies).

8. Cautionary StatementBoku has made forward-looking statements in this financial information, including statements about the market and benefits of its products and services; financial results; product development plans; the potential benefits of business relationships with third parties and business strategies. The Group considers any statements that are not historical facts as “forward-looking statements”. They relate to events and trends that are subject to risk and uncertainty that may cause actual results and the financial performance of the Group to differ materially from those contained in any forward-looking statement. These statements are made by the directors in good faith based on the information available to them and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors underlying any such forward-looking information.

20

FINANCIALS


Independent Review Report To Boku Inc.

IntroductionWe have been engaged by Boku Inc. (the “Company”) to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2020 which comprises the consolidated statement of comprehensive income; consolidated statement of financial position; consolidated condensed statement of cash flows; and associated notes.

We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial information.

Directors’ ResponsibilitiesThe interim financial report, including the financial information contained therein, is the responsibility of and has been approved by the directors. The directors are responsible for preparing the interim financial report in accordance with the rules of the London Stock Exchange for companies trading securities on AIM, which require that the financial information must be presented and prepared in a form consistent with that which will be adopted in the Company’s annual financial statements having regard to the accounting standards applicable to such annual financial statements.

Our ResponsibilityOur responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly report based on our review.

Scope of ReviewWe conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’, issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

ConclusionBased on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2020 is not prepared, in all material respects, in accordance with the rules of the London Stock Exchange for companies whose shares are admitted to trading on AIM.

Use of our reportOur report has been prepared in accordance with the terms of our engagement to assist the Company in meeting the requirements of the rules of the London Stock Exchange for companies trading securities on AIM and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

BDO LLP Chartered Accountants & Registered Auditors, London, United Kingdom 15 September 2019

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

Boku, Inc.2nd floor, 9 Orange Street, London, WC2H 7EA, UK

Documents

Interim Report and Accounts for the half year ended 30